earnings_release-1qtr.htm
 


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): May 6, 2008
NATURAL GAS SERVICES GROUP, INC
(Exact name of registrant as specified in its charter)

Colorado
1-31398
75-2811855
(State or other jurisdiction
(Commission
(I.R.S. Employer
of incorporation)
File Number)
Identification No.)

2911 SCR 1260
Midland, Texas 79706
(Address of principal executive offices)

(432) 563-3974
(Registrant’s telephone number, including area code)

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of
the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the  Exchange Act (17 CFR 240.13e-4(c))

 
 

 

 
Item 2.02.  Results of Operations and Financial Condition.

On May 6, 2008, Natural Gas Services Group, Inc. issued a press release announcing its results of operations for the first quarter ended March 31, 2008. The press release issued on May 6, 2008 is furnished as Exhibit No. 99 to this Current Report on Form 8-K. Natural Gas Services Group's annual report on Form 10-K and its reports on Forms 10-Q and 8-K and other publicly available information should be consulted for other important information about Natural Gas Services Group, Inc.

The information in this Current Report on Form 8-K, including Exhibit No. 99 hereto, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section. The information in this Current Report shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.


Item 9.01.  Financial Statements and Exhibits.

(d)         Exhibits

The Exhibit listed below is furnished as an Exhibit to this Current Report on Form 8-K.
 
 
Exhibit No.
Description of Exhibit
99
Press release issued May 6, 2008
 
(furnished pursuant to Item 2.02)

 
 

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
NATURAL GAS SERVICES GROUP, INC.
 
       
Date:  May 6, 2008
By:
/s/ Stephen C. Taylor  
    Stephen C. Taylor  
    Chairman of the Board, President  
    and Chief Executive Officer  



 
 

 


EXHIBIT INDEX


Exhibit No.
Description of Exhibit
99
Press release issued May 6, 2008
 
(furnished pursuant to Item 2.02)

 
 

 

Exhibit 99
[Missing Graphic Reference]

FOR IMMEDIATE RELEASE
NEWS
May 6, 2008
Amex – NGS

NATURAL GAS SERVICES GROUP ANNOUNCES A 31% INCREASE IN NET INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2008

25% Increase in EBITDA for the Three Months ended March 31, 2008 to $7.8 million
32% Increase in EPS (Diluted) for the Three Months ended March 31, 2008 to $0.29 per share

MIDLAND, Texas, May 6, 2008 – Natural Gas Services Group, Inc. (AMEX:NGS), a leading provider of equipment and services to the natural gas industry, announces its financial results for the first quarter ended March 31, 2008.

(in thousands of dollars, except per share amounts)
 
Three Months Ended March 31,
   
Change
 
   
2007
   
2008
       
   
(unaudited)
       
                   
Revenue
  $ 16,712     $ 18,933       13 %
Operating income
    4,203       5,453       30 %
Net income
    2,681       3,517       31 %
EBITDA
    6,272       7,811       25 %
                         
EPS (Basic)
    0.22       0.29       32 %
EPS (Diluted)
    0.22       0.29       32 %
Weighted avg. shares outstanding:
                       
Basic
    12,061       12,085          
Diluted
    12,083       12,144          

Revenue: Total revenue increased from $16.7 million to $18.9 million, or 13%, for the three months ended March 31, 2008, compared to the same period ended March 31, 2007. This increase was primarily the result of a 30% growth in rental revenue.  

Operating income:   Operating income increased from $4.2 million to $5.5 million, or 30%, for the three months ended March 31, 2008, compared to the same period ended March 31, 2007.  Higher compressor sales gross margins were the largest factor contributing to the increase of operating income.

Net income:   Net income for the three months ended March 31, 2008, increased 31% to $3.5 million, as compared to net income of $2.7 million for the same period in 2007.    Increased operating income, a lower income tax rate, and lower interest expense from our reduced debt balances contributed to the increase in net income.

EBITDA:   EBITDA   (see discussion of EBITDA at the end of this release) increased 25% to $7.8 million for the first quarter ended March 31, 2008, versus $6.3 million for the same period in 2007.

Earnings per Share:   Earnings per diluted share were $0.29 during the three months ending March 31, 2008 as compared to $0.22 during the same 2007 period, a 32% increase.  

 
 

 

Steve Taylor, President and CEO of Natural Gas Services Group, Inc. said, “Our results this quarter reflect the growth we are experiencing in our market segment and a continuation of our operational effectiveness. Our rental and sales growth rates remain vigorous and we anticipate an active year.”

The Company has scheduled a conference call Tuesday, May 6, 2008 at 10:00 a.m., Central Daylight Time, to discuss 2008 First Quarter Results.

What:  Natural Gas Services Group, Inc. 2008 First Quarter Financial Results Conference Call

When: Tuesday, May 6, 2008 at 10:00 a.m., Central Daylight Time

How:  Live via phone by dialing 800-624-7038.  Code: Natural Gas Services.  Participants to the Conference call should call in at least 5 minutes prior to the start time.

Steve Taylor, President and CEO of Natural Gas Services Group, Inc. will be leading the call and discussing first quarter’s financial results.

About Natural Gas Services Group, Inc. (NGS)
NGS is a leading provider of small to medium horsepower, wellhead compression equipment to the natural gas industry with a primary focus on the non-conventional gas industry, i.e., coalbed methane, gas shales and tight gas. The Company manufactures, fabricates, rents and maintains natural gas compressors that enhance the production of natural gas wells. The Company also designs and sells custom fabricated natural gas compressors to particular customer specifications and sells flare systems for gas plant and production facilities. NGS is headquartered in Midland, Texas with manufacturing facilities located in Tulsa, Oklahoma, Lewiston, Michigan and Midland, Texas and service facilities located in major gas producing basins in the U.S.


For More Information, Contact:
Jim Drewitz, Investor Relations
830-669-2466
jim@jdcreativeoptions.com
Or visit the Company's website at www.ngsgi.com



 
 

 

“EBITDA” reflects net income or loss before interest, taxes, depreciation and amortization.  EBITDA is a measure used by analysts and investors as an indicator of operating cash flow since it excludes the impact of movements in working capital items, non-cash charges and financing costs.  Therefore, EBITDA gives the investor information as to the cash generated from the operations of a business.  However, EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States of America (“GAAP”), and should not be considered a substitute for other financial measures of performance.  EBITDA as calculated by NGS may not be comparable to EBITDA as calculated and reported by other companies. The most comparable GAAP measure to EBITDA is net income. The reconciliation of net income to EBITDA and gross margin is as follows:


 
Three months ended March 31,
 
   
2007
   
2008
 
Net income
  $ 2,681     $ 3,517  
Interest expense
    300       241  
Provision for income taxes
    1,574       1,928  
Depreciation and amortization
    1,717       2,125  
EBITDA
  $ 6,272     $ 7,811  
Other operating expenses
    1,200       1,350  
Other expense (income)
    (352 )     (233 )
Gross margin
  $ 7,120     $ 8,928  


We define gross margin as total revenue less cost of sales (excluding depreciation and amortization expense).  Gross margin is included as a supplemental disclosure because it is a primary measure used by our management as it represents the results of revenue and cost of sales (excluding depreciation and amortization expense), which are key components of our operations.  Because we use capital assets, depreciation expense is a necessary element of our costs and our ability to generate revenue and selling, general and administrative expense is a necessary cost to support our operations and required corporate activities.  Management uses this non-GAAP measure as a supplemental measure to other GAAP results to provide a more complete understanding of our performance.  As an indicator of our operating performance, gross margin should not be considered an alternative to, or more meaningful than, net income as determined in accordance with GAAP.  Our gross margin may not be comparable to a similarly titled measure of another company because other entities may not calculate gross margin in the same manner.

Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements involve known and unknown risks and uncertainties, which may cause NGS’s actual results in future periods to differ materially from forecasted results.  Those risks include, among other things, the loss of market share through competition or otherwise; the introduction of competing technologies by other companies; a prolonged, substantial reduction in oil and gas prices which could cause a decline in the demand for NGS’s products and services; and new governmental safety, health and environmental regulations which could require NGS to make significant capital expenditures. The forward-looking statements included in this press release are only made as of the date of this press release, and NGS undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. A discussion of these factors is included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission.




 
 

 


NATURAL GAS SERVICES GROUP, INC.
 CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)
   
December 31,
March 31,
   
2007
 
2008
ASSETS
       
Current Assets:
       
  Cash and cash equivalents
 
$
245
 
$
2,111
  Short-term investments
   
18,661
   
14,348
  Trade accounts receivable, net of doubtful accounts of $110, both periods
   
11,322
   
10,126
  Inventory, net of allowance for obsolescence of $273 and $288, respectively
   
20,769
   
24,490
  Prepaid income taxes
   
3,584
   
  Prepaid expenses and other
   
641
   
203
     Total current assets
   
55,222
   
51,278
             
Rental equipment, net of accumulated depreciation of $16,810 and $18,454, respectively
   
76,025
   
82,175
Property and equipment, net of accumulated depreciation of $4,792 and $5,175, respectively
   
8,580
   
8,442
Goodwill, net of accumulated amortization of $325, both periods
   
10,039
   
10,039
Intangibles, net of accumulated amortization of $1,145 and $1,224, respectively
   
3,324
   
3,245
Other assets
   
43
   
32
     Total assets
 
$
153,233
 
$
155,211
             
LIABILITIES AND STOCKHOLDERS' EQUITY
           
             
Current Liabilities:
           
  Current portion of long-term debt and subordinated notes
 
$
4,378
 
$
3,378
  Line of credit
   
600
   
  Accounts payable
   
4,072
   
6,032
Accrued liabilities
   
3,990
   
3,762
  Current income tax liability
   
3,525
   
57
  Deferred income
   
81
   
877
     Total current liabilities
   
16,646
   
14,106
             
Long term debt, less current portion
   
9,572
   
8,727
Deferred income tax payable
   
12,635
   
14,359
Total liabilities
   
38,853
   
37,192
             
Stockholders’ equity:
           
  Preferred stock, 5,000 shares authorized, no shares outstanding
   
   
  Common stock, 30,000 shares authorized, par value $0.01;12,085 and 12,087 shares issued and outstanding, respectively
   
121
   
121
  Additional paid-in capital
   
83,460
   
83,581
  Retained earnings
   
30,799
   
34,317
     Total stockholders' equity
   
114,380
   
118,019
     Total liabilities and stockholders' equity
 
$
153,233
 
$
155,211
             


 
 

 


NATURAL GAS SERVICES GROUP, INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
(in thousands, except earnings per share)
(unaudited)
 
   
Three months ended March 31,
 
   
2007
   
2008
 
Revenue:
           
Sales, net
 
$
9,506
   
$
9,626
 
Rental income
   
6,940
     
9,010
 
Service and maintenance income
   
266
     
297
 
Total revenue
   
16,712
     
18,933
 
                 
Operating costs and expenses:
               
Cost of sales, exclusive of depreciation stated separately below
   
6,670
     
6,393
 
Cost of rentals, exclusive of depreciation stated separately below
   
2,735
     
3,404
 
Cost of service and maintenance, exclusive of depreciation stated separately below
   
187
     
208
 
Selling, general, and administrative expense
   
1,200
     
1,350
 
Depreciation and amortization
   
1,717
     
2,125
 
 Total operating costs and expenses
   
12,509
     
13,480
 
                 
Operating income
   
4,203
     
5,453
 
                 
Other income (expense):
               
Interest expense
   
(300
)
   
(241
)
Other income
   
352
     
233
 
Total other income (expense)
   
52
     
(8
)
                 
Income before provision for income taxes
   
4,255
     
5,445
 
Provision for income taxes
   
1,574
     
1,928
 
Net income
 
$
2,681
   
$
3,517
 
                 
                 
Earnings per share:
               
Basic
 
$
0.22
   
$
0.29
 
Diluted
 
$
0.22
   
$
0.29
 
Weighted average shares outstanding:
               
Basic
   
12,061
     
12,085
 
Diluted
   
12,083
     
12,144
 
                 



 
 

 

NATURAL GAS SERVICES GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(in thousands of dollars)
(unaudited)
 
   
Three Months Ended March 31,
 
   
2007
   
2008
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
   Net income
 
$
2,681
   
$
3,517
 
      Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
   
1,717
     
2,125
 
Deferred taxes
   
(1,479
) 
   
5,312
 
Employee stock options expensed
   
97
     
95
 
Gain on sale of property and equipment
   
(8
) 
   
 
Changes in current assets and liabilities:
               
Trade and other receivables
   
2,413
     
1,196
 
Inventory and work in progress
   
(2,333
)
   
(3,721
)
Prepaid expenses and other
   
(32
) 
   
438
 
Accounts payable and accrued liabilities
   
2,377
     
1,732
 
Current tax liability
   
2,012
     
(3,468
)
Deferred income
   
534
     
796
 
Other
   
(42
) 
   
18
 
NET CASH PROVIDED BY OPERATING ACTIVITIES
   
7,937
     
8,040
 
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Purchase of property and equipment
   
(4,040
)
   
(8,064
)
Purchase of short-term investments
   
(274
)
   
(187
)
Redemption of short-term investments
   
3,000
     
4,500
 
Proceeds from sale of property and equipment
   
33
     
 
NET CASH USED IN INVESTING ACTIVITIES
   
(1,281
)
   
(3,751
)
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Proceeds from line of credit
   
     
500
 
Repayments of long-term debt
   
(1,908
)
   
(1,845
)
Repayments of line of credit
   
     
(1,100
) 
Proceeds from exercise of stock options and warrants
   
109
     
22
 
NET CASH USED IN FINANCING ACTIVITIES
   
(1,799
) 
   
(2,423
)
                 
NET CHANGE IN CASH
   
4,857
     
1,866
 
                 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
   
4,391
     
245
 
CASH AND CASH EQUIVALENTS AT END OF PERIOD
 
$
9,248
   
$
2,111
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
               
Interest paid
 
$
305
   
$
290
 
Income taxes paid
 
$
999
   
$
84